The Texas Energy Debacle and the Economists

01 May 2021
Dr. Jeff D. Makholm

In an article in the May 2021 issue of the Wiley journal Climate and Energy, Managing Director Dr. Jeff D. Makholm explores various economic perspectives on natural gas and electricity markets in the wake of the February 2021 Texas Power Crisis. Does a remedy to the crisis lie in fixing a broken natural gas market, incentivizing customers when prices rise during a fuel shortage, or in prudent regulation recognizing public safety?

Dr. Makholm notes that what Texas’s electricity system needs is more considered public safety regulation so that suppliers can withstand sustained sub-zero weather, as other states readily do. Texas does not need new powers to divert the state’s available gas supplies in emergencies, as other economists have suggested. Neither is Texas missing a useful mechanism to set competitive power prices that works in most circumstances—it has such a market.

What Texas does not have is reasonable prudential regulation, outside of its normal price-setting mechanism, to ensure weatherization of equipment for power generation and delivery.

Makholm, Jeff D. (May, 2021). “The Texas Energy Debacle and the Economists,” 37/10, ©2021 Wiley Periodicals, Inc., a Wiley company.